Can you give us a brief historical background on the evolution of the banking system since independence?
During the period of independence, an institutional market based banking system was formed, which concerns the banking legislation. The legal basis of the banking system is regulated by "Law on banks and banking activities" and "Law on Central Bank of the Republic of Uzbekistan" that were prepared in cooperation with the specialists of the international financial institutions. The regulative basis, based on these laws, was also worked out in accordance with international standards.
A double banking system including the Central Bank and 34 commercial banks, with more than six thousand branches, was created. Two of them, the National Bank and People's Bank, belong to the State. The rest of them are joint stock and private banks, including the ones with foreign equity.
The commercial banks of Uzbekistan are mainly universal, e.g. provide all types of banking services, and the specialized banks- People's Bank and Tadbirkorbank - are oriented towards certain segments of the financial market.
The major banks are the National Bank, People's bank, Pahtabank, and Asakabank. Their share in the aggregate capital of the banking system of Uzbekistan make up 80% of all credit investment of the country. Over the recent years, we have observed a slowdown in the concentration process of the banking system, and even a reverse trend; the number of private banks is increasing and therefore their capital is increasing in the aggregate capital of the banking capital of the country. Overall, the banks in Uzbekistan are among the most capitalized and stable banks of CIS countries.
Much attention is being paid to the banks' transparency. There is a rating agency acting, which releases financial information and rating evaluation of the activity of banks every quarter, and the transparency of banks is also linked with the banking audit which is held by well known audit companies such as "Arthur Andersen", "Price Waterhouse Coopers", "KPMG", and "Ernst & Young". Together with Arthur Andersen, we worked out and applied new standards of reporting, principles and methodologies of accounting and auditing with the purpose of modernizing of the banking supervision, taxation, assets and liabilities. In April 1997 the banking system of our country has transformed into a new accounting standards that satisfies the international standards of financial report.
The banking infrastructure is rapidly developing in Uzbekistan, and it is getting closer to the principle of the market economy. These principles which were created with participation of the Banking Association are successfully operating:
- interbank center for legal provision "Bank-Khukuk Khizmat",
- interbank insurance company "Banksugurta", which insures the credit risks of the member banks of the Association,
- a leasing company "Baraka", for realization of investment projects and for renewal of production funds,
- an independent audit company "Uzbankaudit",
- interbank trading and trust company "Bank-Invest-Trust", which is involved in activation of the banking activity in the development of stock exchange market,
- joint stock company for centralized provision of banks with modern banking equipment and its technical service "Banktekhservice",
- interbank rating company "Akhbor-rating",
- consulting and engineering company "BankInvestProject" for providing service in the field of engineering and project financing.
In 1994 with the purpose of developing of the state insurance and export support "Uzbekinvest" was established, an export - import insurance company, which is a key player in activation of external trade, lowering the risk of various losses, export support and import financing.
Uzbekistan is actively cooperating with the international financial institutions. Two joint companies were opened with the "American International Group": the political risk insurance company "Uzbekinvest International" headquartered in London, which has a statutory capital of 80 million USD - the share of Uzbekistan - and "UzAIG", which provides different types of insurance in Uzbekistan. A leasing company, "Uzbekleasing International", was also created in collaboration with EBRD, IFC, Maybank (Malaysia), "Case corporation" (USA) and international "UzCaseagroleasing".
The Banking Association of Uzbekistan in cooperation with banks undertakes the project on the national system of non cash settlements using the plastic cards. The NBU has already implemented non-cash settlements with the microprocessor cards. The implementing process of the plastic cards has covered other banks as well, and we are now considering the use of combined cards integrated with the world payment systems like VISA, Master Card/Euro Pay.
In order to achieve our objectives we need a well prepared personnel for the development of the financial sector. With this purpose was formed a whole system of training specialists, which includes:
- The Banking-Finance Academy;
- 6 specialized universities;
- A regional banking training center with participation of EBRD;
- 5 lyceums;
- 45 specialized banking classes.
The development of the computer infrastructure of the banking system of our country was induced by tax breaks provided for the banks during the first 5 years of independence. This allowed to equip banks with the modern technology and telecommunication equipment. A high level of technical equipment allows the banks to satisfy the requirements of the customers, starting from the international settlements up to the creation of special far located points of banking service.
In 1999, the privatization process of the State banks was initiated. The share of the state will make up not more than 50% in each of them. The World Bank provided a technical assistance in the amount of 25 million USD for the faster privatization of banks and competition inducement, which was undertaken in the framework of the loan of institutional development of the financial sector.
An agreement was signed between the Ministry of Finance of Uzbekistan and the EBRD regarding the best way to attract foreign participation into the privatizing banks. In 2000, an Agency for restructuring the assets of the State banks and for their privatization was established. On March 21, 2000 a decree on " Measures for further liberalizing and reforming the banking sector" was issued by the President of Uzbekistan. The main purpose of this decree is the development of new forms of cooperation between the banks and the real sector of the economy; it emphasizes on:
- the creation of a base for unified interests of the bankers and entrepreneurs;
- the creation of conditions to increase the inner financial resources of the banks for investment into the real economy;
- defining the optimal schemes of crediting the small and medium size businesses that provide interests for the commercial banks.
Hereby, the achieved level of the banking sector of Uzbekistan overall meets the requirements of the multi-profile market economy of our country.
What is the role of the banks in financing the real sector of the economy?
Today more than half of the credit resources of the banks of our country is directed to financing the long-term investment projects in priority industries of the economy. The banks are actively financing the projects on creation of the complexes in various sectors of the economy:
- the energetic complex. Originally, the Bukhara oil refining factory was constructed. Now, the Shurtan gas and chemical complex is being constructed. The Ferghana oil refining factory was also rebuilt. There is also being mastered the oil mining in Kokdumalak. All these efforts have allowed us to become self-sufficient energywise;
- the complex on deep processing of cotton. There was enacted textile factories including JV "Papfen", JSC "Namangantextile", JV "Asnamtextile", JV "Kabultextile";
- the chemical and mining industry. Several credit lines were approved for large scale projects related to the organization of the production of chemical cellulose in Ferghana plant, caustic soda in "Navoi Azot", for the reconstruction of khloridmagnium defoliant in «Ferghana Azot», phosphor flour in Kyzyl Kum, among others.
- car manufacturing complex. The joint-ventures on car, truck, and medium size bus productions, "Uzdaewooauto" in Asaka city and "Samkochauto" in Samarkand are successfully run;
- gold mining industry. Two gold mining companies "Zarafshan -Newmont" and "Angren Gold" for exploring gold were set up. The establishment of the JV "Amantaytau-goldfields" was approved;
- tourism sector. We built hotels that meet the international standards - Intercontinental, Shodlik Palace, Sheraton Tashkent and Le Meridien. An international exhibition center was constructed in Tashkent. We also have international airports in Bukhara, Samarkand and Urgench that are being reconstructed. In addition to that, we have restored some of the hangars.
| One of our priorities also consists in financing the projects of small and medium sized businesses whether they are in local or foreign currency. Over the years, the procedures related to issuing a loan and insuring small and medium sized businesses have been considerably simplified.
How is the foreign capital represented in the banking industry of the country?
The presence of the foreign banking capital induces and stimulates the development of competition in the financial market of Uzbekistan. There are 6 banks in Uzbekistan with participation of foreign capital and those are: Uzbek Turkish bank "UTbank", Uzbek Holland bank "ABN AMRO bank", Uzbek Korean bank "uzDaewoo bank", two subsidiary banks - " Central Asian Bank for Development" (uzbekistan, Kazakhstan, Kyrgyzstan) and Iranian bank "Saderat" with 100% capital. "ABN AMRO bank" was created with the share of the capital of EBRD, IFC and the NBU. "UzDaewoobank" was created with the share of EBRD and NBU.
There are 13 representations of the largest banks in the world including "Chase Manhattan bank", "Deutsche bank", "Bankgezelshaft Berlin", "Commerz bank", "Dresdner bank", "Société Générale", "CCF", "BNP-Paribas", "Crédit Suisse" and others.
What role does the NBU play in the Uzbek economy, and what is its position in the banking sector?
NBU is as old as Uzbekistan and was created by decree of the President in September, 1991. Its main task is to assist in the development of export production, to attract foreign investments and conduct international settlements, and finally, to provide a wide range of banking services in light of international standards. NBU acts as a universal commercial, export-import, investment, savings bank, as well as the bank for project financing.
Undoubtedly, NBU is the country's leading bank with assets representing up to 60% of the whole banking system. We provide a wide range of banking services for corporate and private customers. Among the corporate customers of our bank are the largest enterprises that make the base of our economy, small and medium sized private enterprises.
At the beginning of 2000 having the paid capital amounting to 637 million USD and assets amounting to 4.1 billion USD, NBU is one of the largest banks in Central and Eastern Europe, CIS and the largest in Central Asia.
Our loan portfolio exceeds 2.1 billion USD. We received 98 international loans with a total value of 1,9 billion USD, and we successfully cooperate with export-credit agencies such as Eximbank of the USA, Korea, Turkey, JBIC, Hermes, Coface, Sace, EGGD, ERG, Du Krua and others. In the entire history of our bank, there was not a single situation where we couldn't pay back our external loans, and where our lenders had to request a guarantee from the Republic of Uzbekistan.
77% of our portfolio is based on long to medium term loans ; this figure reflects our commitment to the development of the industrial potential of the country. From 1993 to 1999 our bank financed 209 investment projects amounting for 3.4 billion USD.
NBU's network comprises 450 correspondent banks in 66 countries worldwide.
NBU is equipped with the latest computer technology, network infrastructure, software systems of automation of the operational activity of our bank, manager system, SWIFT system, Reuters/Dealing, the system of international sputnik communication.
Development of the branch network is one of the priorities in the activity of our bank.100 branches and NBU affiliates are located throughout our territory, in each and every economically strategic region. Their activity involves providing access to modern banking services, international lines in all the regions of the country, and to create a base for the development of entrepreneurship, small and medium sized businesses.
NBU desperately undertakes the policy of service expansion for the population. Our bank is the second on the market when attracting private depositors. Last year marked a turning point in the implementation of the bank's card system. The technical and technological platform of operation processing on VISA cards, electronic cards, emitted in the national currency, has been transformed into a new level and based on a considerable service expansion and quality enhancement.
The bank is very active in the stock exchange. Its investment portfolio covers shares of enterprises involved in the construction of airport facilities, transport, tourism and financial. The private investment in stock capitals of 33 enterprises make up 3.9 bln sums and 13 mln USD, including the insurance company "UzAIG", "ABN AMRO bank", the leasing company "Uzbekleasing", and others.
As the largest investment bank in the country, NBU is one of the country's main partners in the development of the financial and industrial sectors, as well as in the implementation of economic reforms.
The worked out system of security trade over-the-counter through the affiliates - "Zamonaviy Mulkdor" provides the customers services on buying and selling of securities, and it also makes any forms of investment activity accessible for the enterprises and private persons with the assistance of the electronic over-the-counter trade "Elsis Savdo".
NBU is actively cooperating with the international institutions. Today NBU is exploring a number of credit lines of EBRD, IFC, ABD, OPEC fund for the investment projects including the ones in the field of small and medium sized private business. NBU was granted 255 million USD by the international financial community to facilitate the growth of small and medium sized businesses. 150 investment projects were financed out of those funds.
In 1999, NBU took several measures to insure a better co-operation with foreign financial institutions. NBU being a member of the Asian Banking Association (ABA) and the Association of Financial Institutions for Development of Asia and Pacific Ocean (ADFIAP), has been an organizer of the meeting of the board of directors of ADFIAP in Tashkent in April, 2000. In 2001, NBU will participate in the annual meeting of ABA. In 2003, will be held in Tashkent the annual meeting of the Board of Administrators of the EBRD.
Does NBU has a branch in Moscow?
Yes, it does. In 1996, we created a subsidiary bank called "Asia Invest bank" in Moscow. The success of the operation proves that we made the right decision; we can now rely on a sound financial structure to handle our import-export trade between Uzbekistan and Russia.
In 1999 "Asia Invest bank" considerably expanded its field and volume of activity by positioning itself as a prime partner in the Uzbek-Russian trade, and as a leading bank in the Russian banking system. As of 1999 "Asia Invest bank" was in top 200 largest banks in Russia, being the 145th in the rating of "Dengi" magazine. It is the 17th most reliable bank, and it is 7th based on its liquidity ratio.
The NBU has been rated by various organisations as being one of the best 1000 banks worldwide. What have been the key factors in your success ?
The activity of NBU has obtained a good international evaluation. In the rating of the top 1000 largest banks in the world conducted by "The Banker", NBU was 824 in 1993, and raised to 429 as of 1999. As for the coefficient of reliability BIS is in the top ten reliable banking institutions.
In 2000 the "Thomson Financial bankwatch" agency confirmed NBU inner country emission rating IC-B/C, and the short term rating (in the national currency) LC - 1, which are the best among the banks in CIS countries.
The success of NBU was also confirmed by "Euromoney" under the evaluation of which, our bank was
recognized to be the best in Uzbekistan in 1998,1999, 2000 and the best in Central Asia in 1999. In 1999 as for "Trade Finance" two transactions between Société Générale and NBU were among the best transactions of the year.
In May, 2000 on the annual Banking Congress of Asia and Pacific Ocean region the NBU "Program of the development of small and medium sized business" has gained a high evaluation of the financial society. Because of our contribution towards the private sector, our bank was recognised as having "the best financial development program".
Could you tell us more about the upcoming privatization of the bank?
The purpose of the privatization process is to attract a strategic investor, as well as to increase the bank's transparency and management's effectiveness.
Change in the form of ownership under which 40% of the capital offered to the first class foreign institutional investors will allow NBU, using basic principles of corporate management, implement the strategy of its development more effectively. Its main elements are the modernization of the bank's investment policy, the strengthening of its role as the main channel of inflow for foreign investment into Uzbekistan's economy, the increased assistance to the small and medium sized business, and finally a more dynamic approach in order to bring new customers to the bank.
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National Bank for Foreign Economic Activity of the Republic of Uzbekistan 